Paying off mortgage for rental property

TLC

Frequent Poster
Messages
454
We own a rental property for which we have a mort of 130,000 interest only thru bank of Scotland. It's been rented for the past 4 years, thankfully, and it covers the repayments & insurance. The current tenant will be moving out in May & we'll have to do a few small jobs to try & rent it out again. My question is would there be any point in paying off the mortgage - or even a portion of it - as we would have the cash to do it, but it would take a massive chunk out of our savings. What would be the advantage/dis-advantage of doing this.
We haven't approached the lender yet (I did try ringing the other day but gave up after being on hold for 10 minutes), so don't know if we did pay off some of the loan would we be able to keep the interest only or would they want us to go to a re-payment mort.
We're just worried that if in the near future the Euro is "Kaput" our money would be worth nothing anyway, so would now be the time to pay off the house.
Hopefully, we'll be able to rent it out again as there is still a fairly strong rental market in the area & we're not charging over the odds - we're happy if the rent covers our cost. Any comments would be appreciated.
 

Brendan Burgess

Founder
Messages
37,508
It is not a good idea.

Do you have a mortgage on your home? Pay it off first as the net interest rate after tax is likely to be a lot lower.

You may well get a discount from Bank of Scotland some time in the future, so I think it's worth taking the risk that your deposit may go kaput.

If the euro goes kaput, I would think that your deposit and your loan would be similarly devalued, so that is not really a problem.

If you do choose to reduce the mortgage, they will be delighted and will not kick you off your tracker or your interest only.

Brendan
 

TLC

Frequent Poster
Messages
454
Thanks Brendan, the mort is actually on our family home & we own the rental property outright. I may contact BOS & see what they come up with - just to see what our options would be. I wouldn't tell them we would be in a position to pay it off in total, just that we "may" be coming into some money in the future.
We bought it to try & make up for the fact that as a "housewife" back in the 80's I didn't know that I should have been signing for credits & missed out on all those years. So it was supposed to be a bit of a nest egg for retirement - so much for that idea!
 
Top